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How Much Homeowner’s Insurance Coverage Do You Need?

You are almost certainly required to purchase homeowner’s insurance as a stipulation of your mortgage loan. But exactly how much coverage do you need in your policy?

One of the biggest mistakes you can make with homeowner’s insurance is not having enough coverage. Some estimates indicate that about 60 percent of policy holders are actually underinsured.

Here are some of the factors you’ll need to consider when purchasing homeowner’s insurance in El Paso, TX.

Dwelling coverage

Dwelling coverage is the easiest part of your homeowner’s insurance to determine exactly how much you need. Your dwelling coverage should be what it would cost to replace your house. But how do you calculate the replacement cost? This is a little harder.

Your assessed property value is not the same as the replacement cost. You can use online calculators to give you estimates taking into account square footage and local construction costs. You can also get professionals to give you estimates so you have a more accurate idea for insurance purposes. Some other factors will be building codes, whether you’ve done any remodeling, whether you have any old or hard-to-replace features and the fluctuating prices of building materials.

Personal property coverage

Personal property coverage covers furniture, clothes, appliances, electronics, food and basically anything else you own in your home. Your coverage should be enough to replace all your belongings. It’s not particularly easy to calculate this cost. It can help to make an inventory of everything you have, and pay special attention to rare or particularly expensive items. Ultimately it’s going to come down to your best guess in this area, but it’s better to be over-insured than underinsured.

Liability coverage

Liability coverage protects you if someone suffers an injury while on your property. This could include someone falling down the stairs, a child getting hurt on a backyard playground or someone being bitten by a dog you own. Most homeowner’s insurance policies come with a minimum liability coverage of $100,000, but we strongly recommend purchasing at least $300,000 in liability coverage, and $500,000 if you can swing it.

We mentioned dog bites being covered under this policy. Keep in mind that depending on where you live, there are some dog breeds that are considered high-risk, and many insurance policies will be hesitant to cover you if you own them, at least at a reasonable rate. These breeds include pit bulls, German shepherds, Great Danes, Rottweilers and more.

Other coverages

There are other types of coverages you can add to your policy if you wish, including additional living expenses (ALE) coverage. This coverage acts as an emergency fund in case your house is destroyed and you need to live somewhere else for a while. You might consider adding such coverage if you live in a particularly disaster-prone area.
For more information about how to get the right amount of homeowner’s insurance for your situation, contact an experienced insurance broker in El Paso, TX at Pan American Insurance, Inc. We look forward to assisting you!

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